Thursday, July 26, 2012

Give Credit Where Credit is Due

Doug Brady reports that Adam Gropnik in the New Yorker claims that ”that Adam Smith would have had no
trouble with Barack Obama’s recent remarks about how the existence of public
roads nullifies the significance of individual accomplishment and justifies the
administrative state.”

I noted this piece
in a “Conservatives 4 Palin” Blog post HEREThe piece originates from Yuval Levin
in National ReviewHERE

Yuval Levin
continues:

“Count me a skeptic.
Gopnik is certainly right to say that Smith believed that markets were created
and sustained by public policy, and that building infrastructure is an
important public purpose which government should pursue. Everyone else believes
that too. Obama’s assertion that his opponents disagree with that is
preposterous. But as Gopnik also notes, Smith was an ardent critic of what we
today would call crony capitalism. His case for the approach he lays out in The
Wealth of Nations begins from a critique of the then-reigning economic approach
known as mercantilism, under which each of the European powers set market rules
that served the interests of a few large domestic manufacturers and trading
companies that worked closely with the government—putting economic policy in
the service of what they took to be the national interest, in order to advance
the nation’s trading position. Smith argued that legislators should instead
govern the market in the interest of the common consumer, and that the interest
of that consumer would be best served by intense, open competition among
producers that did not privilege large and well-connected businesses over smaller
and newer rivals.

Crony
capitalism—and a preference for a few large companies in each part of the
economy that will function as agents of the government and be rewarded and
protected accordingly—is the core of the Obama administration’s approach to the
economy. It’s the essence of Obamacare and Dodd-Frank, for instance. And it is
decidedly not about open competition in the service of the common consumer’s
interest. You can name your new agencies consumer protection bureaus all you
like, what they’re doing is making the economy more consolidated and easily
manageable from the center, rejecting competitive enterprises in favor of
public utilities. That’s basically the opposite of Smith’s vision.”

Comment

I agree with Yuval
Levin and I acknowledge Doug Brady’s role in bringing it to our attention.I think it is a perceptive rebuttal of
the oft-heard view that the state is a natural ally of big business in a
corporate-state relationship.

However, I must
tread carefully here because, as the comments in the National Review on Levin’s
piece show, it is risky to appear to get involved in the mist enveloping the politics of other
countries, of which I do not know much and in which I do not vote.Even mentioning controversial names,
like Mrs Palin or President Obama, in an election year invites trouble from their respective 'enemies'.

My interest,
however, is in what Adam Smith said about these issues.He saw an important role for government
(defence, justice, public works, education of all ages and treating “noxious
diseases”). All these areas of
expenditure would expand as the country’s economy and the political
requirements of the growing population increased, as we know happened.Where and how much the state’s
responsibilities would expand is, and remains, a prime political question,
i.e., controversial. Currently, we face a problem where expansion of the
states has been fueled by borrowing beyond the creditors’ willingness, or
capacity, to fund their ever-increasing borrowing.

But the point
remains that Smith was not antagonistic to state spending, nor was he in favour
of a “night watchman state”.Such
choices were open to the will of the legislature (not the King’s alone).He was critical of politicians who
though they knew best what people, or the economy, wanted or required, and of those who influenced them and who pursued narrow
sectional interests (in his day, those of landed interests or of “merchants
and manufacturers).